Americans in Israel Targeted by IRS for Tax Audits

Suspected Child Credit Fraud of Hasidim Prompts Scrutiny

By Nathan Guttman

Published March 03, 2014, issue of March 07, 2014.
  • Print
  • Share Share
  • Single Page

(page 2 of 3)

As the claims mounted, suspicion grew at the IRS, which eventually set up an “Israel project” for dealing with suspected tax returns from Israel, said Charles Ruchelman, a former government tax lawyer who now represents clients in tax controversies and litigation. “When they identify a trend, they start a project, and that’s what happened here,” he said. Eventually, almost all tax returns from Americans living in Israel that included a request for child tax credit were put under extra scrutiny and many have been audited.

The broad brush used to uncover Israeli fraudsters has had an impact on many American families living in Israel and will continue to do so in the upcoming years, as the IRS looks into 2013 returns.

“I never thought it would happen to me. Last week I received a letter from the IRS stating that I owed tens of thousands of dollars in taxes and penalties,” wrote a Haredi blogger after receiving the IRS envelope containing the audit announcement.

One Jerusalem resident told the Forward that her family spent months gathering the documents needed for the audit, which eventually found no wrongdoing in the family’s tax returns. “They wanted to see every pay stub and every document,” said the mother of four, who asked not to be identified due to concern that it would negatively impact her tax case.

Besides such income data, the IRS has demanded that families in Israel supply birth certificates, passports and detailed listings of their travel in and out of Israel to determine their eligibility for the child tax credit. In addition, the IRS requires Israelis to have all documents translated by a professional translator, a demand that is not imposed on other countries and results in hefty translation bills for those being audited. “These are abusive audits,” argued Adlerstein.

While audits have been ramped up, no criminal charges have been filed against any of the fraudulent tax preparers working in Israel. The difficulty in reaching them could have to do with the reluctance of tax filers to turn in the preparers to the authorities.

An Israeli tax professional shared the story of a client from the ultra-Orthodox community in Bnei Brak who was asked to pay $25,000 in back payments and fines. The family, who spoke little English and was unaware of the details included in its tax returns, refused to provide the IRS with the name of the person who prepared the fraudulent returns, citing Jewish laws that prohibit snitching on fellow Jews to the authorities.

“The IRS has decided not to believe anything coming out of Israel and now it has in place this massive audit program that is creating great hardship for families, especially young families with children,” said Stein.

The IRS did not respond to questions from the Forward regarding its audit policy of tax filers living in Israel.

The Jewish Daily Forward welcomes reader comments in order to promote thoughtful discussion on issues of importance to the Jewish community. In the interest of maintaining a civil forum, The Jewish Daily Forwardrequires that all commenters be appropriately respectful toward our writers, other commenters and the subjects of the articles. Vigorous debate and reasoned critique are welcome; name-calling and personal invective are not. While we generally do not seek to edit or actively moderate comments, our spam filter prevents most links and certain key words from being posted and The Jewish Daily Forward reserves the right to remove comments for any reason.

Find us on Facebook!
  • "If Netanyahu re-opens the settlement floodgates, he will recklessly bolster the argument of Hamas that the only language Israel understands is violence."
  • Would an ultra-Orthodox leader do a better job of running the Met Council?
  • So, who won the war — Israel or Hamas?
  • 300 Holocaust survivors spoke out against Israel. Did they play right into Hitler's hands?
  • Ari Folman's new movie 'The Congress' is a brilliant spectacle, an exhilarating visual extravaganza and a slapdash thought experiment. It's also unlike anything Forward critic Ezra Glinter has ever seen.
  • The eggplant is beloved in Israel. So why do Americans keep giving it a bad rap? With this new recipe, Vered Guttman sets out to defend the honor of her favorite vegetable.
  • “KlezKamp has always been a crazy quilt of gay and straight, religious and nonreligious, Jewish and gentile.” Why is the klezmer festival shutting down now?
  • “You can plagiarize the Bible, can’t you?” Jill Sobule says when asked how she went about writing the lyrics for a new 'Yentl' adaptation. “A couple of the songs I completely stole." Share this with the theater-lovers in your life!
  • Will Americans who served in the Israeli army during the Gaza operation face war crimes charges when they get back home?
  • Talk about a fashion faux pas. What was Zara thinking with the concentration camp look?
  • “The Black community was resistant to the Jewish community coming into the neighborhood — at first.” Watch this video about how a group of gardeners is rebuilding trust between African-Americans and Jews in Detroit.
  • "I am a Jewish woman married to a non-Jewish man who was raised Catholic, but now considers himself a “common-law Jew.” We are raising our two young children as Jews. My husband's parents are still semi-practicing Catholics. When we go over to either of their homes, they bow their heads, often hold hands, and say grace before meals. This is an especially awkward time for me, as I'm uncomfortable participating in a non-Jewish religious ritual, but don't want his family to think I'm ungrateful. It's becoming especially vexing to me now that my oldest son is 7. What's the best way to handle this situation?" What would you do?
  • Maybe he was trying to give her a "schtickle of fluoride"...
  • It's all fun, fun, fun, until her dad takes the T-Bird away for Shabbos.
  • "Like many Jewish people around the world, I observed Shabbat this weekend. I didn’t light candles or recite Hebrew prayers; I didn’t eat challah or matzoh ball soup or brisket. I spent my Shabbat marching for justice for Eric Garner of Staten Island, Michael Brown of Ferguson, and all victims of police brutality."
  • from-cache

Would you like to receive updates about new stories?

We will not share your e-mail address or other personal information.

Already subscribed? Manage your subscription.